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7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 MILLE FLEURS, a Corporation; and CASE NO. 21cv1096-LAB-AGS 11 MISTER BERTRAND LLC dba 12 BERTRAND AT MISTER A’S, ORDER GRANTING MOTION TO DISMISS [Dkt. 7] 13 Plaintiffs, 14 vs. 15 NATIONWIDE MUTUAL INSURANCE COMPANY, a 16 Corporation; and DOES 1 through 17 25, 18 Defendants. 19 On March 11, 2020, The World Health Organization declared that the 20 SARS-CoV-2 virus that causes COVID-19 had spread widely enough that it 21 could be called a pandemic. Within eight days, the City of San Diego, San 22 Diego County, and the State of California issued orders requiring all 23 individuals in those jurisdictions to stay at home except as necessary to 24 engage in essential activities. Patronizing bars and restaurants wasn’t 25 considered an essential activity, and over the course of the pandemic, further 26 orders placed varying levels of restriction on those establishments. 27 Those orders severely affected the business of Mille Fleurs and Bertrand 1 Fleurs Inc. and Mister Bertrand LLC. They filed claims for those losses with 2 their insurer, Defendant Nationwide Mutual Insurance Company 3 (“Nationwide”), which denied the claims. 4 Plaintiffs then filed this action in state court, asserting claims for breach 5 of contract and breach of the implied covenant of good faith and fair dealing. 6 Nationwide removed the case to this Court and now moves to dismiss both 7 claims. 8 STANDARD OF REVIEW 9 A Rule 12(b)(6) motion to dismiss calls for a preliminary evaluation of a 10 party’s pleading and tests only whether the pleading provides “a short and 11 plain statement of the claim showing that the pleader is entitled to relief, in 12 order to give the defendant fair notice of what the claim is and the grounds 13 upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) 14 (internal marks and citation omitted). The required short and plain statement 15 “does not need detailed factual allegations,” only “factual allegations . . . 16 enough to raise a right to relief above the speculative level . . . on the 17 assumption that all the allegations in the complaint are true.” Id. (internal 18 marks and citations omitted). The Court asks a narrow question: if the pleader 19 were to succeed in proving the pleading’s factual allegations and facts 20 reasonably inferred from those allegations, would the defendant be liable? 21 See Ashcroft v. Iqbal, 556 U.S. 662, 666 (2009); Fed. R. Civ. P. 8(a)(2). 22 DISCUSSION 23 The answer to that question in this case is “no.” To the contrary, the facts 24 alleged foreclose the possibility that Nationwide would be liable. The Plaintiffs 25 assert two theories: first, that Nationwide breached the contract of insurance 26 (the “Policy”) between it and the Plaintiffs; and second, that the violation was 27 in bad faith. Both claims require Plaintiffs to allege a breach of the Policy. See 1 1088, 1109 (2015) (breach of contract claim requires plaintiff to establish 2 defendant’s breach); Everett v. State Farm Gen. Ins. Co., 162 Cal. App. 4th 3 649, 663 (2008) (“Because there was no breach of contract, there was no 4 breach of the implied covenant”). 5 Plaintiffs allege that Nationwide breached the Policy by refusing to cover 6 losses from the presence of COVID-19 in nearby properties, (Compl., Dkt. 1- 7 2, ¶ 33), and from government orders requiring Plaintiffs to: 1) suspend 8 operations temporarily; 2) limit customers’ access to their businesses; and 9 3) “make substantial detrimental physical alterations to their property.” (Id. ¶¶ 10 24–31, 34–35). They allege, too, that these orders were issued in response to 11 the COVID-19 pandemic. (Id. ¶ 33). 12 But the Policy contains an exclusion (the “Virus Exclusion”) providing 13 that Nationwide “will not pay for loss or damage caused by or resulting from 14 any virus . . . that induces or is capable of inducing physical distress, illness, 15 or disease.” (Compl. Ex. 1, Dkt. 1-4 at 17). Plaintiffs argue that this exclusion 16 doesn’t apply because causation is lacking: their Complaint “contains no 17 allegations that there was virus on the property,” but instead alleges that they 18 “suffered losses as a result of several government orders . . . enacted . . . as 19 a result of the global COVID-19 pandemic.” (Dkt. 9 at 17–18). 20 Losses from such orders are caused by the SARS-CoV-2 virus. After the 21 parties in this case completed briefing on the instant motion, the Ninth Circuit 22 Court of Appeals issued its decision in Mudpie, Inc. v. Travelers Casualty Ins. 23 Co. of America, 15 F.4th 885 (2021). In that case, the panel considered 24 whether an identically worded exclusion precluded coverage for losses from 25 government stay-at-home orders issued in connection with the COVID-19 26 pandemic under California law, concluding that it did. Id. at 893–94. 27 California law looks to “the efficient cause—the one that sets others in 1 || quoting Sabella v. Wisler, 59 Cal. 2d 21 (1963). Because the stay-at-home 2 || order that allegedly caused the losses in Mudpie stated that it was issued “as 3 || a result of the threat of COVID-19,” the Ninth Circuit panel found that the virus 4 || was the “efficient cause” of the plaintiff's alleged losses. /d. The panel affirmed 5 || dismissal of the plaintiff's complaint, finding that the alleged losses were 6 || barred by virus exclusion. 7 Here, the causal chain is the same or even more direct. Plaintiffs allege 8 || that the virus caused various government orders, which in turn caused some 9 || of their losses. (Compl. J 33). And they allege that their remaining losses were 10 || caused by COVID-19’s presence on neighboring properties, without any 11 || intervening causal steps. (/d. J 32). Under Mudpie’s binding interpretation of 12 || California law, these losses were “caused by or resulting from” COVID-19. The 13 || Virus Exclusion takes Plaintiffs’ alleged losses outside the Policy, so 14 || Nationwide didn’t breach the Policy by declining to cover them. 15 CONCLUSION 16 Without a breach, Plaintiffs can’t claim breach of contract and they can’t 17 claim that the nonexistent breach was in bad faith. The Motion to Dismiss is 18 || GRANTED and Plaintiffs’ claims are DISMISSED WITH PREJUDICE. The 19 || Clerk is directed to close the case. 20 IT IS SO ORDERED. 21 || Dated: March 21, 2022 lau A ( Ay 22 HON. LARRY ALAN BURNS United States District Judge 23 24 25 26 27 28